After updating to iOS 8 and OS X Yosemite; iCloud will take note of all your devices and any new device you add, and store this data locally, to make them available and ready to connect to share information between each other even when offline. Your iMac for example will be aware if you own a MacBook or an iPhone, and your iPad will be aware of your iPhone or MacBook. Your devices will be also aware when they’re in proximity (near or far), in use or idle, and in somecases which App is active at that moment.

Now, lets say you needed a WiFi, and your iPhone was in your jacket or your bag, and you are in front of your MacBook to do some work, as soon as you click your WiFi menu your MacBook will look for devices in proximity (>100 m [>330 ft]) — your MacBook already know the devices it needs to look for because they all share the same iCloud account, so within a second; your MacBook will find your iPhone, and your iPhone will then share its signal/data strength, and battery level (thanks to Bluetooth Smart).

‘The beauty’ of Instant Hotspot; regardless if you used your iPhone as a Personal Hotspot before or not, even if you never connected your MacBook to your iPhone before, and ‘the magic’ even if the Personal Hotspot was turned OFF in your iPhone; once you click to connect to your iPhone — Personal Hotspot, your MacBook will then talk to your iPhone over Bluetooth to turn ON the Personal Hotspot feature, and once its ON your MacBook will then connect to the internet using WiFi — Personal Hotspot (to give you a speedier connectivity). All this happen in a second without you touching your iPhone, without a password, or any configurations. It works like magic!

iOS 8 is a major release for Apple, more major than the move to iOS 7

Yes, it also work iPad to iPhone. Like your iMac or MacBook, iPad store the information of your other iCloud devices and able to turn ON your iPhone — Personal Hotspot even if it never connected to it before, and just like your Mac no password or any configurations needed. And the biggest surprise; your iPhone can now tap into your iPad — Personal Hotspot, not sure why Apple added this to iPhone, but somehow I believe the reason is that iOS 8 (a major release for Apple even more major than the move to iOS 7) for iPad and iPhone is merging into a single OS as Apple gearing to blur the line between phones and tablets. If you been a long time iPhone and iPad user you’ll see this through out iOS 8 UI.

Instant Hotspot only work between devices that share the same iCloud account

Apple’s Instant Hotspot can’t be shared, and only you can connect to it. To share your internet with others; you will need to turn ON your Personal Hotspot manually and share your password with them. Instant Hotspot only work between devices that share the same iCloud account.

Finally, your iPhone Bluetooth and WiFi need to be ON for your MacBook or your iPad to connect to it, and if your iPhone data plan doesn’t include Personal Hotspot this feature won’t work, and your iPhone won’t even show up in your WiFi menu.